‘Rip-off’: App developer and Consumer say fees will stifle open banking and create roadblocks for start-ups

Nick Houldsworth (right) with his Prosaic cofounder, Rowan Oulton.

Banks are being accused of stifling a new measure designed to boost competition and innovation by charging app providers to access their systems.

From December 1 ANZ, ASB, BNZ and Westpac have agreed to introduce more support for “open banking” which would allow fintechs to connect to the banks.

The fintechs can then use the banking data to provide personal app-based financial services to the public.

But the fintechs will have to pay for the access - a situation which consumer advocates say will mean the cost will likely be passed on to the end users.

Nick Houldsworth, co-founder of Prosaic - maker of an app for sharing GST income and expenses with your accountant, says he strongly supports the Government‘s open banking push.

The change will make it easier and more efficient for his software to talk to the banks’ software through application programming interfaces or APIs.

For Prosaic, it could suck down its customers’ account statements directly - a better and easier way to comb through things looking for tax-deductible expenses than its customers having to download their accounts as CSV files, then upload them to Prosaic.

Under the new rules, banks are prohibited from charging customers for API requests or “calls” (each instance of Prosaic or another personal finance or accounting app wanting to talk to a bank’s software).

But they can charge app makers like Prosaic 1c per API call, to a monthly cap of $5 per customer (and some customers will have accounts with more than one bank).

‘Rip-off’

“Wow. NZ banks have found a new way to rip off Kiwi consumers and stifle open banking innovation,” Houldsworth wrote in a LinkedIn post that went viral.

He called the fees “hidden” in the Government’s broader open banking announcement - most of which he strongly supported.

“NZ is the ONLY country proposing any sort of API fees for basic bank transaction data sharing. UK, Europe, Australia, Canada, USA. All free. Just little old us, being ripped off by the banks, once again,” Houldsworth wrote.

“This is a classic failure of tech regulation by non-tech regulators, and almost certainly a case of banks playing ‘look over here, don’t look over here’ when it comes to fees. It‘s just 1c per API call! So cheap!”

‘Huge investment’

But the New Zealand Banking Association says the change requires a lot of investment from the major banks.

“Our banks support open banking and have made a huge investment in the technology to make it a reality,” NZBA chief executive Roger Beaumount said.

“In consultations with the Government, we have not expressed an industry view on API pricing because that’s ultimately a commercial matter for banks and third parties.”

Houldsworth‘s post drew supportive comments from the likes of Simplicity Founder Sam Stubbs who said: “Totally agree, Nick. These fees are unprecedented in developed markets and totally contradictory to the spirit of open banking.”

Fellow fintech entrepreneur Josh Daniell said: “The rest of the open banking regulation is well designed, and is promising for achieving its objectives - competition and innovation - but this pricing is prohibitive for many services.”

Punakaiki Fund manager Lance Wiggs, who invests in fintech start-ups, added: “This should not be a revenue item for the banks, and the proposed charges make a lot of activities uneconomic.”

‘Roadblock’ - Consumer

Despite the new rules prohibiting banks from passing on API charges to their customers, Houldsworth maintains that will happen anyway as app providers will have to pass on the cost to their users.

The Herald highlighted his comments to Consumer NZ, which agreed with his theory.

“Open banking was touted by the Commerce Commission as a ‘game-changer’ - boosting innovation and competition by giving people control over their financial data,” Consumer campaigns manager Sahar Lone said.

“The goal is simple: help consumers access better financial services that banks haven’t delivered. But the Government‘s draft policy comes with a catch.

“While it rightly bans banks from charging consumers for data sharing, it still allows them to charge accredited providers up to one cent per API call, capped at $5 per customer per month.

“These fees may seem small, but they create roadblocks for start-ups and new players trying to enter the market. They protect the status quo and weaken the potential for real disruption.”

Costs ‘likely to be passed to consumers’

“In the end, these costs are likely to be passed on to consumers. If people have to pay to use their own data, it‘s hard to call that open banking,” Lone said.

“If we want real change in the banking sector - more innovation, better services, and real competition - we should be removing roadblocks, not building new ones.”

Simpson: From no cap to a cap

“At the moment, there isn’t a cap on what fees banks can charge for open banking transactions,” Commerce and Consumer Affairs Minister Scott Simpson told the Herald.

“The regulations will make open banking more affordable for both data requestors - such as fintechs and apps - and bank customers, as they will cap the fees that banks can charge for accessing customer data.”

Simpson added, “I’m very excited about the roll-out of open banking in New Zealand. Once it is operational [from December 1], I look forward to seeing it working in practice and seeing what else the Government can do to ensure Kiwi consumers are getting the most out of it.”

There would be flow-on benefits. Many fintechs offer payment processing. Simpson said the open banking reforms would spur more innovation, putting pressure on credit card companies to lower their fees.

"I look forward to seeing it [open banking] working in practice and seeing what else the Government can do to ensure Kiwi consumers are getting the most out of it” - Commerce and Consumer Affairs Minister Scott Simpson.

For Houldsworth, it was a case of “starting from a bad position and ending in slightly less worse position” or as he also put it, more bluntly: “Just because the high school bully used to hang me up by my underwear and steal my lunch money and now he just steals my lunch money, doesn’t mean stealing my lunch money is okay.”

The Government was trying hard to reduce fees in credit card transactions and other areas of banking.

“The best way to cut fees is to stop them before they start.”

Houldsworth said the costs were “a tiny fraction of [banks’] net profits” and that banks would also see internal benefits from upgrades.

ASB: Waiving the fees for a year.

The NZBA referred the Herald to individual banks for comment. Two initially replied.

“We’re waiving fees for third-party providers for their first 12 months in partnership with us to encourage broader open banking uptake. We’ve had positive feedback from our partners, including POLi, that we’re easy to do business with.

“We want to continue to make it simple for fintechs and our customers to become early adopters of open banking and make it a success in New Zealand.”

The ASB-POLi relationship is something of a poster child for open banking.

Although it has never suffered a data breach, and is used by many large companies and Government agencies for online payments, POLi has drawn security-scare criticism for requiring people to type their banking password into its system.

Earlier this week, ASB said it had signed a deal with POLi for POLi transactions to instead be approved via the bank’s app, no log-on sharing required.

A spokeswoman for Kiwibank said: “We fully support Open Banking and the benefits it will bring to customers and will provide more details about our offer before we go live.”

Right level of incentives

The Commerce Commission referred the Herald to MBIE for comment.

“The proposed fee caps have been set at a level to incentivise banks and fintechs to invest in system capability while keeping it affordable for consumers,” an MBIE consumer policy manager, Glen Hildreth, said.

“If fees were not regulated fintechs would need to negotiate individually with each bank and could result in limited access for fintechs and consumers.

“This could potentially undermine the aim of regulated open banking to boost competition and options for customers.”

‘Will need to evolve over time’ - RBNZ

“Open banking has the potential to increase competition and innovation in New Zealand’s financial system and the framework developed under the Customer and Product Data Act 2025 [the legislation, passed in March, that enables open banking changes] provides a good foundation for this,” Reserve Bank director of money and cash Ian Woolford said.

“International experience shows that the calibration of detailed design decisions, such as the fees or cost, can have out-sized impacts on the overall success of open banking. The act will require careful implementation and ongoing stewardship.

“To meet its potential, it will need to evolve over time to meet the changing needs of users and the finance sector.”

Too simplistic

Houldsworth, who held senior roles at Xero and Vend before becoming an investor and founder, says there needs to be more nuance now.

He says regulators have failed to distinguish between an API call where value is added by, for example, Stripe processing a payment for an app, or Google Maps providing it with location co-ordinates, and a simple exchange of data, such as Prosaic grabbing a customer’s raw bank account data.

“Most of the internet is predicated on exchanging data for free,” Houldsworth said.

The Prosiac founder said some of his customers used two or even three banks. Thousands of API calls per year were required for many users.

He said it was ironic that the Government was on a financial literacy push, but the $5 per month open banking fees could hobble a personal finance tracking and education app like Pocketsmith, which costs from $9.99 per month. It could cost $10 in open banking fees alone if a user had, say, their credit card with one bank and their mortgage with another.

Notwithstanding its official comment about the fee being at the right level, an MBIE official had contacted Houldsworth to learn more about Prosaic’s situation.

“MBIE has engaged actively with us this week, which is good,” Houldsworth said.

A meeting was being lined up next week between MBIE’s open banking policy team and people from the industry including himself and representatives from Pocketsmith, Emerge, Simplicity and others to share feedback.

Chris Keall is an Auckland-based member of the Herald‘s business team. He joined the Herald in 2018 and is the technology editor and a senior business writer.